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U.S. Stock ETFs Keep the Party Going on Recovery Hopes

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U.S. markets and stock exchange traded funds maintain their forward momentum Monday after last week’s upbeat jobs report helps fuel optimism over a quick turn around for the economic recovery.

On Monday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 0.3%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) gained 1.2%, and SPDR S&P 500 ETF (NYSEArca: SPY) rose 0.8%.

“There have been a number of indicators that have been in place for a number of weeks that would lead you to believe this is all points to us coming out of a recession,” Andrew Slimmon, a managing director and senior portfolio manager at Morgan Stanley Investment Management, told the Wall Street Journal.

On Friday, the jobs report revealed the U.S. economy added an unexpected 2.5 million jobs in May, beating forecasts that called for another month of job losses and providing investors the needed support to dive back in to risk assets.

“Most likely, May will have marked the peak of massive job losses,” Magdy El Mihdawy, senior strategist at Cantor Fitzgerald said in a note, according to Reuters. “While the recovery in jobs will likely take several years, the market is only focused on the trough.”

Slimmon also highlighted other signs of recovery such as the outperformance of small-cap shares over large-caps and a pickup in breadth across the equity market as a higher percentage of stocks trade back above their 50-day moving averages.

Consequently, more investors are growing bullish on value stocks that have lagged behind growth this year.

Looking ahead, investors will be watching out for the Federal Reserve’s two-day policy meeting, ending Wednesday, where officials will likely discuss the updated jobs report at length. This will also be the first meeting since April when Fed Chair Jerome Powell warned the U.S. economy could suffer the weight of the economic shutdown for more than a year.

“Even though the market sentiment has improved, there’s a little bit of recognition that while the U.S. payroll figures were strong, assuming that we’re well on the road to a full recovery is a little premature,” Edward Park, deputy chief investment officer at Brooks Macdonald, told the WSJ.

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